Apparel stocks like footwear giant Nike (NYSE:NKE) and Canadian women’s clothing retailer Artizia (TSX:ATZ) have really been feeling the pinch of the latest macro headwinds. Consumer spending isn’t in an ideal spot right now. Just have a look at the chart of Nike or Artizia. Whether or not a recession happens, I think the share prices of both firms have been extremely oversold.
Yes, apparel and retail may stay in a funk for several more quarters. However, I view the Nike and Aritzia brands as incredibly resilient. Further, once the economy is ready to move on from a slowdown, I view both apparel plays as potential ways to maximize gains as discretionary spending experiences some sort of cyclical upswing.
Indeed, it’s hard to tell when consumers will be willing to pay for the latest Nike sneakers or fashions from the local Aritzia. At the end of the day, they sell discretionary goods that don’t tend to sell like hotcakes in the early innings of a potential economic downturn. Regardless, I find valuations in both companies to be relatively attractive, given their long-term growth runways.
In this piece, we’ll have a closer look at each firm to see which one is the better fit for your long-term-focused portfolio.
Nike stock: Just do it?
Nike has an iconic brand, and with the Canadian dollar in a weak spot relative to the U.S. greenback, there ought to be a pretty compelling value proposition to justify such a currency swap. With Nike, I believe there’s incredible value to be had as shares are currently in the midst of a historic funk.
At just shy of $100 per share, Nike stock is off more than 44% from its 2021 all-time high of around $180 per share. After such a nasty losing streak, Nike is unloved right now. But the power of the swoosh, I think, will shine through once consumer headwinds pass in due time.
At writing, the stock goes for 30.85 times trailing price to earnings, with a 1.38% dividend yield. The stock may look a tad pricey at these levels. However, a year from now, when consumer spending has a chance to recover, I think sneaker demand will pick up, and Nike stock will be running (please forgive the pun) higher once again. For now, it’s an uphill climb.
Aritzia stock: Value and growth together!
Aritzia may be the better bet if you seek a lower price of admission and would rather not swap your Canadian dollars for greenbacks at these rates. While Aritzia may be in a different corner of the apparel scene, I find the 17.1 times trailing price-to-earnings multiple to be way too low, given the firm’s growth.
As a mere $2.73 billion company, there’s a lot of room to take share in the fashionable retail scene. For now, headwinds will keep weighing down expectations. If you’re in it for the next few years, I’d say stashing a few shares in a TFSA isn’t such a bad idea if you’re a fan of the brand. Personally, I view Aritzia as one of the most intriguing apparel brands to come out of Canada since Lululemon.
Better buy: Nike stock or Aritiza shares?
I like Nike better at these levels. It’s an iconic brand in apparel that you can’t find in Canada. After a historic flop, I think Nike stock is a screaming buy on the dip.
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* Returns as of 8/16/23
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Aritzia. The Motley Fool recommends Lululemon Athletica and Nike. The Motley Fool has a disclosure policy.